Mortgage Help

[LateNight72]

I'm trying to help some friends purchase another home. They moved a few years ago and have been renting houses since.

PLEASE DON'T: Tell me the obvious. I know they're the reason why people like you, me and this country are in this credit crisis, etc. This thread isn't about that, if the thread turns to that, hopefully a Mod can help it stay on track.

The problem: They have terrible credit. When they moved they had to short-sell their house. They had a 2nd Mortgage on the house also, if that matters. They also had a few personal loans and credit cards of various degrees which they defaulted on, due to being laid off. One of which they are still dealing with. They also only have a 5%-10% down payment.

The situation: They are looking at a house that is for sale around here that is likely to be short-sold. The asking price is below what my friends are making in a year's salary, combined. My friends have rented two separate houses now on 12-Month contracts, and have perfect payment history for both. I imagine it wouldn't be hard at all for them to get signed/notarized affidavits of their payment history.

The question: They obviously can't just walk into a Mortgage brokers office and get a loan, can they? What (if anything) can they do to get a loan for the house?

The big problems I see is that they can probably only scrounge up a 5-10% down payment, and they have s*** for credit history. Does anyone have a recommendation as to what they can do? I really have very little knowledge of the mortgage industry. There's something in the back of my head that says "their screwed for a long time".

Even doing a 15 year FRM @ 15.00% interest, they can still afford it, as it's less than they're paying for rent right now! They can afford up to 20% interest, if they really needed to.

Thoughts?


I appreciate all serious feedback. I'd love to get them into a house of their own, but their previous poor choices might prevent that.

[Vegas69]

They need to rent and rebuild their credit score. My understanding is a minimum of 2 years after a short sale for another loan and that very well may require more down than 10%.

[MonzaRacer]

Well if they have had perfect billing record on rentals, also have a deposit, and good income and have cleaned up their "other" commitments they could go into the place holding mortgage on soon to be short sale and try to work something out , with a deposit proof of good rental record they might get some help, but who knows till they try. Proof of trying to fix financial issues some times help and also dealing with local credit unions over big banks os they hold note locally help.
Oh and as long as payment doesnt come in over the 25% of monthly take home also good rule, may need a bigger down payment but with cash in hand and proof of good rental payments may make some people budge.

[MonzaRacer]

On a side note have them check out www.daveramsey.com and call some of his Endorsed Local Providers in their area, they MAY be able to help.

[class67]

Unfortunately, I think that they might be screwed for a little longer. They will need a bigger down payment, somewhere along the lines of 27% I believe and be able to prove they are capable of making the payment. If it is any consulation, there is an influx of short sales hitting the market right now and looks like it will be this way for a while to come.

[6'9"Witha69]

Not going to happen. Most lenders are requiring 10-20% down on manilla stuff. But, it never hurts to ask. I would go to a reputable mortgage broker. I have a buddy in TX who is really good, and well connected all over. Let me see if he knows anyone in AL who could help.

[2ndgenhunter]

How long has it been since they have had any defaults,charge offs, and repos?

I see you said they've had 2 12 mth leases. So thats 2 years of stable payment.
I would start by talking the the company that hold the note now and if that doesn't work, There are alot of secondary mortgage companies out there. They will get raped on interest rates but if the pay good for 18 mth they can refinace.

I know of a few places up in huntsville that might tote their note. I'll get their # and pm them to you.

[ArtosDracon]

I can just tell you what I've found trying to by a home for the last year. They NEED a 620 or better credit score. I've right on the edge of that and have made it through. 3.5% is the minimum you can really get away with down, and that's going with an FHA loan, which is still available. If they have more down they may be able to go conventional, but they're still going to need a 550 or better credit score, they're going to get slammed on points up front, but they seem to be able to handle that. Also, make sure they get those other loans sorted out before they start trying to buy the house. Even if they pay back just part of it, or something, get it taken care of, they do not want a collection pending when they're trying to get a loan, it just won't happen. They also need to be 100% up to date with utilities and rent, late payments are going to look very bad given their previous situation. Also, it's going to take time, if they had to do a short sale, that functions as a deed in leau of trust, and is going to take ~2 years minimum before they're going to get a new loan.